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With the business potentially at an important milestone, we thought we'd take a closer look at Rio2 Limited's (CVE:RIO) future prospects. Rio2 Limited engages in the exploration, development, and mining of mineral properties in Canada, Peru, Bahamas, and Chile. The company’s loss has recently broadened since it announced a US$12m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$14m, moving it further away from breakeven. The most pressing concern for investors is Rio2's path to profitability – when will it breakeven? We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.
Consensus from 2 of the Canadian Metals and Mining analysts is that Rio2 is on the verge of breakeven. They anticipate the company to incur a final loss in 2025, before generating positive profits of US$36m in 2026. Therefore, the company is expected to breakeven just over a year from today. How fast will the company have to grow each year in order to reach the breakeven point by 2026? Working backwards from analyst estimates, it turns out that they expect the company to grow 89% year-on-year, on average, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
We're not going to go through company-specific developments for Rio2 given that this is a high-level summary, but, take into account that by and large a metal and mining business has lumpy cash flows which are contingent on the natural resource mined and stage at which the company is operating. This means, large upcoming growth rates are not abnormal as the company is beginning to reap the benefits of earlier investments.
View our latest analysis for Rio2
Before we wrap up, there’s one aspect worth mentioning. Rio2 currently has no debt on its balance sheet, which is rare for a loss-making metals and mining company, which typically has high debt relative to its equity. This means that the company has been operating purely on its equity investment and has no debt burden. This aspect reduces the risk around investing in the loss-making company.
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There are key fundamentals of Rio2 which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Rio2, take a look at Rio2's company page on Simply Wall St. We've also put together a list of pertinent aspects you should look at: